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US dollar builds on gains but Asia markets struggle

Thursday, May 4, 2017 - 12:44

The dollar built on the previous day's gains on Thursday after the Federal Reserve opened the door for another US interest rate hike next month.

ST PHOTO: KUA CHEE SIONG

[HONG KONG] The dollar built on the previous day's gains on Thursday after the Federal Reserve opened the door for another US interest rate hike next month but Asian markets mostly turned lower in a holiday-filled week.

After a closely watched meeting the US central bank gave a broadly positive view of the world's top economy and said a recent spout of soft data, including below-par first-quarter growth, were "likely to be transitory" and that activity would pick-up over the year.

The Fed's statement fanned expectations it will announce another rate lift next month - the second since December - as long as data points in the right direction.

Focus now turns to the release Friday of the government's jobs creation data for April and statements from Fed boss Janet Yellen as well as other top bank officials, which could provide some forward guidance to markets.

Market voices on:

"The Fed has doubled down on its confidence that the US economy is still on track for more rate rises and growth will bounce back from the first quarter's moribund pace," Greg McKenna, chief market strategist at AxiTrader, said in a note.

The dollar headed towards the 113 yen mark Thursday, building on a recent rally, while it held up against the euro and pound. It also advanced against most high-yielding currencies including the Australian dollar, Indonesia's rupiah and the Thai baht.

"Barring any unexpected shock, we should see the greenback supported until Friday, and we should expect the markets to then move on the (jobs) report, especially the wage growth component," said Stephen Innes, senior trader at OANDA.

- Seoul eyes record - Despite the positive spin from the Fed, Asian equities mostly struggled Thursday in a week that has seen several markets closed for various public holidays.

Hong Kong slipped 0.4 per cent, Shanghai was down 0.5 per cent and Singapore also shed 0.5 per cent. Wellington and Taipei were down 0.1 per cent each.

Sydney sank 0.6 per cent on a drop in iron and copper prices, while BHP Billiton was off by a similar amount after Australia blocked a plan by one of the mining giant's top shareholders to move its primary listing to London.

New York-based Elliott Advisors wants to restructure the firm - saying it could unlock as much as 50 per cent more value in the stock - and dissolve its costly dual-listed structure, with assets transferred to a new company incorporated and listed in Britain.

Canberra said such a move was against the country's interests and without government consent it could amount to a criminal offence.

Seoul's KOSPI was among the few positive performers Thursday as it headed for a record close thanks to a pick-up in foreigners entering the South Korean market and improving corporate results, led by heavyweight Samsung Electronics, which itself is at an all-time high.